The Big Fracking Bubble: Rolling Stone & Chesapeake Energy in War of Words

When we posted our guide for communities and landowners on fracking, one of the most important recommendations was that people should go into any discussion of fracking with their eyes wide open, and preferably accompanied by a lawyer.

It would seem that this observation would hold true not just for landowners and community members, but investors too. At least that's the case if Jeff Goodell of Rolling Stone is to be believed. In an incendiary piece entitled The Big Fracking Bubble, he takes aim at Chesapeake Energy—one of the biggest players in the fracking industry:

According to Arthur Berman, a respected energy consultant in Texas who has spent years studying the industry, Chesapeake and its lesser competitors resemble a Ponzi scheme, overhyping the promise of shale gas in an effort to recoup their huge investments in leases and drilling. When the wells don't pay off, the firms wind up scrambling to mask their financial troubles with convoluted off-book accounting methods. "This is an industry that is caught in the grip of magical thinking," Berman says. "In fact, when you look at the level of debt some of these companies are carrying, and the questionable value of their gas reserves, there is a lot in common with the subprime mortgage market just before it melted down."

Chesapeake Energy, for their part, issued a response to Goodell arguing that he was quoting "short-positioned analysts, activist academics and publicity-seeking litigants", before attempting to pick apart each of Goodell's sources.

Aubrey McClendon, the CEO of Chesapeake Energy, has a reputation for being a tough street-fighter, so his company’s response to my article in Rolling Stone is no surprise. (You can view the entire response here.) What is surprising is how weak it is. The company entirely dodges the article’s central point: that Chesapeake is highly-leveraged firm operated by a corporate gambler who engaged in complex scheme to profit off the illusion that America has a virtually unlimited supply of cheap natural gas.

Goodness. It's all rather exhausting. It makes me wonder whether instead of searching for the next cheap energy, we might all be better off by using an awful lot less energy of any kind. And when the fracking companies do come knocking, be sure to hire a lawyer (and maybe an accountant too).